DEUTSCHE BANK GLOBAL AUTO CONFERENCE January 15, Our Innovation. Your Advantage.

Transcription

1 DEUTSCHE BANK GLOBAL AUTO CONFERENCE January 15, 2019 Our Innovation. Your Advantage.

2 Forward-Looking Statements This presentation includes forward-looking statements within the meaning of U.S. federal securities laws, and we intend that such forward-looking statements be subject to the safe harbor created thereby. Our use of words estimate, expect, anticipate, project, plan, intend, believe, forecast, or future or conditional verbs, such as will, should, could, would, or may, and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we cannot assure you that these expectations, beliefs, and projections will be achieved. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. Among other items, such factors may include: prolonged or material contractions in automotive sales and production volumes; our inability to realize sales represented by awarded business; escalating pricing pressures; loss of large customers or significant platforms; our ability to successfully compete in the automotive parts industry; availability and increasing volatility in costs of manufactured components and raw materials; disruption in our supply base; entering new markets; possible variability of our working capital requirements; risks associated with our international operations; foreign currency exchange rate fluctuations; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers' needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal proceedings, claims or investigations against us; work stoppages or other labor disruptions; the ability of our intellectual property to withstand legal challenges; cyber-attacks or other disruptions in our information technology systems; the possible volatility of our annual effective tax rate; changes in our assumptions used for evaluation of deemed repatriation tax and the remeasurement of our deferred tax assets and liabilities, including as a result of IRS issuing guidance on Tax Cuts and Jobs Act that may change our assumptions; the possibility of future impairment charges to our goodwill and long-lived assets; and our dependence on our subsidiaries for cash to satisfy our obligations. You should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except where we are expressly required to do so by law. This presentation also contains estimates and other information that is based on industry publications, surveys, and forecasts. This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of the information. 2

3 Company Overview 3

4 Growing Global Automotive Supplier 2018 Revenue: ~$3.6 billion 1 (52% NA, 29% Europe, 16% Asia, 3% SA) $300+ million in unconsolidated JVs Automotive Supplier Rank 2 : 66 Globally 46 North America Global Footprint: 120+ facilities 21 R&D facilities 21 countries Employees: 33,000+ employees 1 Based on most recent Company guidance 2 Source: Automotive News - June

5 Primary Product Lines 2017 Revenue by product / % of Total Revenue Sealing Sealing Systems Systems $1.9B / 53% #1 Globally Fuel & Brake Delivery Fuel Brake Delivery Systems Systems $0.8B / 21% #2 #2 Globally 1 Fluid Transfer Fluid Transfer Systems Systems $0.5B / 14% #3 Globally Anti-Vibration Anti-Vibration Systems Systems $0.3B / 9% North American Leader Sale Pending Market position data Boston Consulting Group (2018) and company estimates 1 Two companies tied at this level 5

6 Our Journey to World-Class Defined Vision, Values & Strategy Established Strategic Pillars Appointed Global Leadership Team Launched CS Foundation Invested for Profitable Growth Launched i 3 Innovation Process Initiated China Growth Initiatives Driving Value Through Culture, Innovation and Results Invested in Property, Equipment and Infrastructure Enhanced Global Technical Capabilities Increased Investment in Innovation and Diversification Established Advanced Technology Group (ATG) Announced Sale of AVS Business

7 Driving Value Through Culture, Innovation and Results Performance Since % Improved Quality PPM +77% Improved Safety Total Incident Rate +$379m Cost Reductions Operating Efficiency As of November 2018 As of November 2018 Based on 2018 guidance +39% Revenue Excluding FX 1 +88% Stock Price $12m Charitable Contributions $6m From Employee Engagement Based on 2018 guidance As of January 14, 2019 As of December Revenue excluding FX is a non-gaap financial measure. See appendix for non-gaap definitions and reconciliations. 7

8 2019 Outlook 8

9 Light Vehicle Production 2 (Million Units) Key Company Measures 2019 Guidance and Key Assumptions Sales Adj. EBITDA 1 Capital Expenditures 2019 Est. $ $3.60 billion $300 - $340 million $180 - $190 million Effective Tax Rate 16% - 18% North America 17.0 Europe 22.2 Greater China 27.9 Outlook incorporates economic and industry uncertainties 1 Adjusted EBITDA is a non-gaap financial measure. See appendix for non-gaap definitions and reconciliations. 2 Source: IHS 9

10 Proactively Managing Volatile Global Business Environment Market Challenges Increased customer price pressure Higher raw material costs Tariff impacts Supply/demand issues Inflationary environment Tight labor markets Geo-political uncertainty Regulatory changes Unfavorable production volume/mix China Europe Proactive Responses Optimization of manufacturing footprint Increased lean initiatives and cost reductions Company-wide reductions in SGA expense Enhanced IT infrastructure to drive process automation and efficiency Accelerated focus on innovation and diversification Strategic M&A with no stranded costs Further Near-term Opportunities Leverage innovation to offset price pressure and raw material cost increases Negotiate raw material cost recovery Optimize China manufacturing footprint Increase sales of value-add innovations Continued expansion of Advanced Technology Group (ATG) Reduce inventory and CAPEX to optimize cash flow Close sale of AVS business Continue opportunistic share repurchase 10

11 Well Positioned to Capitalize on Industry Trends 11

12 Strong Content in the Right Segments Global Light Vehicle Production - Million Units 1 Projected Growth % CAGR Cooper Standard Advantaged Market Position 2 Cars Crossovers Light Trucks +3.8% CAGR % Revenue - Global 27% 44% 21% % Revenue - N. America 13% 38% 46% CPV (relative to cars) Global +58% +132% +0.8% CAGR CPV (relative to cars) N. America +104% +303% Car Crossover Truck 1 Source: IHS December Data based on Company estimates full year

13 Products Essential Across all Powertrains and Mobility Options Currently a Supplier on 7 of the Top 10 EV Platforms Internal Combustion Hybrid All Electric Autonomous SEALING SYSTEMS INNOVATION ENHANCEMENTS FOR LIGHTER MATERIALS AND QUIET INTERIORS FLUID TRANSFER SYSTEMS ADDITIONAL COOLING LOOPS = HIGHER CPV FUEL & BRAKE DELIVERY SYSTEMS 13

14 Continuing Ramp Up of Asia Pacific 1 Business Projected Sales, USD millions 2 ~$600m ~$1.3B Asia Pacific Key Highlights Customer Mix 2 12% 23% Revenue expected to grow faster than market, on average, over next several years World-class manufacturing footprint in place to support significant growth Capacity utilization and overhead absorption expected to improve with increased sales Customer mix shifting toward local OEMs with China approaching 30% by 2023 Global OEMs Local OEMs Global OEMs Local OEMs Includes China, India and Korea 2 Estimates based on current management projections, IHS production estimates 14

15 Growth Outlook Outpacing Global Automotive Market Cooper Standard Revenue Outlook 1 USD Millions $3.6B ~$4.6B 5.0% CAGR vs. global light vehicle growth 2 of 2.1% Net impact year over year of acquisitions / divestitures in 2019 is $(160)M or (4.4%) Asia sales expected to exceed $1B by 2021; China sales expected to exceed $1B by 2023 Advanced Technology Group revenue increasing rapidly 2018E 2019E 2020E 2021E 2022E 2023E % Booked 99% 92% 78% 62% 48% 1 Includes booked, planned replacement and targeted new business. Assumes no acquisitions/divestitures. 2 Source: IHS December

16 Accelerating Value Through Innovation 16

17 Providing Customer Solutions Through Innovation Driving Sustainable Competitive Advantage for Cooper Standard Fortrex Sealing Reduces weight, improves performance, and offers appearance options ArmorHose Family of Products Eliminates requirement for protective sleeves, reduces weight MagAlloy Coating Improves corrosion performance and product life utilizing proprietary technology Gen III Posi-Lock Quick Connector Simplifies systems; reduces mass and complexity 17

18 Delivering Breakthrough Innovations 1 to the Market Projected Automotive Innovation Revenue 2 USD Millions $1,200 $1,000 $800 $600 $400 $200 $ Sealing Fuel and Brake Fluid Transfer 1 Commercialized innovation products include: MagAlloy, ArmorHose, ArmorHose TPV, Gen III Posi-Lock, TP Microdense and Fortrex Includes new and replacement business. 2 Estimates based on current management projections, IHS production estimates 18

19 Better material properties Leveraging Advanced Data Analytics to Accelerate Innovation Using Artificial Intelligence to Accelerate Material Development A.I. finds answer in 5 steps, starting at same point as humans Data Analytics & Digital Tools Historical trials by humans; compound improving but not good enough A.I. training A.I. answers Reduces compound development time up to 80% Helps achieve higher product performance Developing additional A.I. applications 19

20 Advanced Technology Group - Strategic Diversification 20

21 Advanced Technology Group Non-automotive Business Overview Strategic Objectives 1. Expand non-automotive business to 25-30% of total Company 2. Further enhance ROIC Industrial and Specialty Group (ISG) Leverage core competencies and traditional technologies in near adjacent, non-automotive and specialty markets Applied Material Science Business Accelerate and maximize the value stream of material science innovations in diverse industries and markets 21

22 Industrial and Specialty Group Leveraging Traditional Technologies in Non-automotive Markets Air Intake Hose Turbo Coolant Lines Window & Door Seals Rubber Trim Seals AC Hose/Tube Assemblies Cowling Seal Auxiliary Cooling Assemblies Window & Door Seals Hydraulic Hose/ Tube Assemblies Breather Hose Cowling Seal Engine Cooling Hose Filter to Rail Hose Window & Door Seals Door Gaskets Encapsulated Glass Glass Run Seal Engine Oil Tube Radiator Hose QC Hood Seal AC Assemblies Trim Seals Coolant QC Engine Cooling Hose/Tube Assemblies Multi-layer EVAP Lines Fuel Rails Multi-layer Fuel Lines Fuel QC Engine Oil Tubes Fuel Assemblies Engine Cooling Hose/Tubes Structural Tube - Rails Fuel Feed Lines & QC Oil Pick-up Hose Water Pick-up Assemblies Fuel Vapor Lines & QC PVC Tube ASm Tube Drain Tube Suction Assemblies TOC Hose Assemblies & QC Transmission Cooler Coolant Hose/Tube(s) Overmolded Bracket Oil Pickup Tube Bulb Seal Brake & Fuel Tank Bundle Inner & Outer Belts Front Brake Line Assemblies Sealing Systems Fuel & Brake Delivery Systems Fluid Transfer Systems ISG Global Addressable Market of $3.2 Billion* *Source: Company estimates 22

23 FORTREX Chemistry Platform Applied Material Science Leveraging Fortrex TM Chemistry Platform in Diverse Processes and Applications Current Processes Sample Target Markets/Applications Foam Membrane Footwear Seating Athletic Gear Consumer Products Roofing Construction Industrial Consumer Products Diversified pipeline of potential licensees progressing through defined gate process Branding initiative underway for broader licensing Film Injection Consumer Products Industrial Footwear Consumer Products Industrial Automotive Existing licensees (INOAC, PolyOne) advancing toward start of production/revenue generation Expecting to sign multiple new license agreements in 2019 Extrusion Automotive Wire and Cable Construction 23

24 Advanced Technology Group Revenue Outlook* USD Millions ~$500 ~$ E 2019E 2020E 2021E 2022E 2023E Within 5 Years, ~50% achievement toward $1B revenue objective excluding new M&A *Includes booked, planned replacement and targeted new business. 24

25 Summary 25

26 Value Drivers Culture of innovation and sustainability Increasing innovation portfolio Continuing operational excellence Profitable growth of Asia Pacific business Continued strong net new business wins Leveraging material science capabilities Rapid growth in non-automotive markets Pursue synergistic M&A opportunities 26

27 Q & A 27

28 DEUTSCHE BANK GLOBAL AUTO CONFERENCE January 15, 2019 Our Innovation. Your Advantage.

29 Appendix 29

30 Continuing Strong Balance Sheet and Credit Profile Title Gross Debt and Net Debt (USD millions) Liquidity Profile (USD millions) Leverage Ratio (Gross Debt /TTM Adj. EBITDA 1 ) Interest Coverage Ratio ( TTM Adj. EBITDA 1 / Interest) x x x x 1 See Appendix for definitions and reconciliation to U.S. GAAP Numbers are subject to rounding 30

31 Conservative Debt Maturities Debt Maturity Profile (USD millions) Annual interest spend of $43 to $45M Annual debt amortization of $3.4M Advantaged interest rates: Term Loan LIBOR bps Senior 5.625% $315 $400 $3 $3 $3 $3 $ (1) Term Loan B final maturity on November 2023 (2) Senior Notes final maturity on November

32 Non-GAAP Financial Measures EBITDA, adjusted EBITDA, revenue growth excluding FX and net debt are measures not recognized under U.S. GAAP and which exclude certain noncash and special items that may obscure trends and operating performance not indicative of the Company's core financial activities. Management considers EBITDA, adjusted EBITDA, revenue growth excluding FX and net debt to be key indicators of the Company's operating performance and believes that these and similar measures are widely used by investors, securities analysts and other interested parties in evaluating the Company's performance. In addition, similar measures are utilized in the calculation of the financial covenants and ratios contained in the Company s financing arrangements and management uses these measures for developing internal budgets and forecasting purposes. EBITDA is defined as net income adjusted to reflect income tax expense, interest expense net of interest income, depreciation and amortization, and adjusted EBITDA is defined as EBITDA further adjusted to reflect certain items that management does not consider to be reflective of the Company's core operating performance. Revenue growth excluding FX is defined as period to period change in revenue adjusted to reflect constant foreign currency exchange rates. Net debt is defined as total debt minus cash and cash equivalents. When analyzing the Company s operating performance, investors should use EBITDA, adjusted EBITDA, revenue growth excluding FX and net debt as supplements to, and not as alternatives for, net income, operating income, or any other performance measure derived in accordance with U.S. GAAP, and not as an alternative to cash flow from operating activities as a measure of the Company s liquidity. EBITDA, adjusted EBITDA, revenue growth excluding FX and net debt have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company s results of operations as reported under U.S. GAAP. Other companies may report EBITDA, adjusted EBITDA, revenue growth excluding FX and net debt differently and therefore the Company's results may not be comparable to other similarly titled measures of other companies. In addition, in evaluating adjusted EBITDA, it should be noted that in the future the Company may incur expenses similar to or in excess of the adjustments in the below presentation. This presentation of adjusted EBITDA should not be construed as an inference that the Company's future results will be unaffected by special items. Reconciliations of EBITDA, adjusted EBITDA and revenue growth excluding FX follow. 32

33 Adjusted EBITDA Margin, Financial Ratios Twelve Months Ended September 30, 2018 (Unaudited, dollar amounts in thousands) Twelve Months Ended Q Q Q Q September 30, 2018 Net income attributable to Cooper-Standard Holdings Inc. $ 28,501 $ 56,792 $ 41,877 $ 32,156 $ 159,326 Income tax expense 34,269 11,891 9,130 (1,190) 54,100 Interest expense, net of interest income 10,324 9,800 9,973 9,983 40,080 Depreciation and amortization 38,675 36,259 36,914 36, ,946 EBITDA $ 111,769 $ 114,742 $ 97,894 $ 77,047 $ 401,452 Gain on sale of long-lived asset (1) (10,714) (10,714) Restructuring 6,917 7,125 10,013 2,703 26,758 Amortization of inventory write-up (2) Impairment charges (3) 10,493 10,493 Settlement charges (4) Foreign tax amnesty program (5) 1,502 1,502 Loss on refinancing and extinguishment of debt (6) Adjusted EBITDA $ 131,206 $ 122,637 $ 107,907 $ 69,571 $ 431,321 Debt Debt payable within one year $ 36,947 Long-term debt 727,183 Total debt $ 764,130 Less: cash and cash equivalents (282,357) Net debt $ 481,773 Leverage ratio (Total debt/adjusted EBITDA) 1.8 Net leverage ratio (Net debt/adjusted EBITDA) 1.1 Interest coverage ratio (Adjusted EBITDA/Interest expense) 10.8 Sales $ 937,914 $ 967,391 $ 928,262 $ 861,653 $ 3,695,220 Net income margin (Net income/sales) 3.0% 5.9% 4.5% 3.7% 4.3% Adjusted EBITDA margin (Adjusted EBITDA/Sales) 14.0% 12.7% 11.6% 8.1% 11.7% (1) Gain on sale of land in Europe that was contemplated in conjunction with our restructuring plan. (2) Amortization of write-up of inventory to fair value for the Lauren acquisition. (3) Non-cash impairment charges related to fixed assets. (4) Non-cash settlement charges relating to U.K. pension plan. (5) Relates to indirect taxes recorded in cost of products sold. (6) Loss on refinancing and extinguishment of debt related to the applicable amendment of the Term Loan Facility entered into during such period. 33

34 Revenue Growth Excluding FX Reconciliation (Unaudited, dollar amounts in billions) * Change % Change Revenue $ 2.9 $ 3.6 $ % Cumulative FX Adjustment $ 0.3 Revenue excluding FX $ 2.9 $ 4.0 $ % * Based on most recent 2018 guidance. 34